Canaccord|Genuity research report: Redflow at a tipping point with its energy storage business


ASX listed energy storage company Redflow (ASX: RFX) has released its quarterly cash flow report for the December quarter, showing a reduction in R&D costs as well as lower staff costs, while advertising and marketing expenses increased.
Cash was $4.2m at the end of December, but this has been boosted by almost $2m thanks to a R&D tax refund in January 2016, so current cash is $6.2m.

The expenses are largely in line with our expectations, and the company’s overheads keep running at $0.6m per month.
Revenues were modest at $62,000 for the quarter, reflecting the hiatus in battery sales as the company’s manufacturing is transferred from Brisbane to the new factory in Mexico, under the contract manufacturing agreement struck with US company Flextronics.
Redflow states that it anticipates cash inflows in the next two quarters from product sales, as production ramps up, particularly in the June quarter. The key issue for Redflow is the ability to grow sales. This will be driven by the following drivers:

• Strong global demand for energy storage as renewable energy supply grows, and the
more intermittent nature of solar and wind requires storage to manage grid stability.
• Reduced costs of renewable energy and battery technologies making this combination
commercially competitive with traditional electricity supply.
• Competitive positioning of Redflow’s zinc-bromine battery versus other batteries such
as lithium-ion, and lead-acid batteries.
• Redflow’s ability to market its battery, and get sales traction in this growth segment.

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